Assume the Chinese monetary authorities are committed to maintaining the exchange rate of China’s currency, the Yuan, against the US$ between ${P_1}$ and ${P_2}$ on the diagram.
What might they do if demand changed from ${D_1}$ to ${D_2}$?
1 )
impose controls on Chinese investment overseas
2 )
increase interest rates
3 )
sell US$ from foreign exchange reserves
sell Yuan on the foreign exchange markets
